Lease Accounting and Asset Finance Blog | Quadrent

Are You Ready for Scope 3 Emissions Reporting?

Written by Marty Jaynes | Oct 30, 2022 10:13:46 PM
Countries and companies alike have committed to reaching net zero carbon emissions by 2050. To achieve this, emissions must be halved by 2030. With this deadline less than ten years away, it’s critical for businesses to act now. Not only does acting now reduce a company’s environmental footprint, but it also means proactive steps are taken to address environmental, social and corporate governance (ESG) issues before needing to catch up to new regulation. In Australia and New Zealand, Scope 3 emissions reporting is a perfect example of the need to take cues from other countries that are further along their ESG journeys.

 

Scope 3 emissions reporting isn’t a requirement across Australia and New Zealand yet. However, this will likely change in the future. Developments such as the introduction of the Modern Slavery Statements register under the Modern Slavery Act 2018 (Cth) in Australia indicates that the infrastructure to expand reporting requirements is available, so businesses should prepare now. Keep reading to learn how companies can proactively prepare for Scope 3 emissions reporting.

What are Scope 3 emissions?

Under the “Greenhouse Gas (GHG) protocol, the most widely used emissions reporting protocol, there are three groups of emissions. These emissions are identified as “Scopes”:

  • Scope 1: Direct emissions from fuel combustion, company vehicles, and manufacturing and production.
  • Scope 2: Indirect emissions from indirect energy consumption, such as emissions from electricity produced offsite.
  • Scope 3: Emissions generated in the broader economy, mostly the upward supply chain. These emissions are produced by activities not owned or controlled by the business.

According to McKinsey, about 70 per cent of a business’s total emissions come from their supply chains. Given Scope 3 emissions can be more difficult to control as these are produced by third parties, potential ESG issues must be addressed in the procurement process. This makes sustainable procurement a key pillar in proactively preparing for Scope 3 emissions reporting in Australia and New Zealand.

How should businesses prepare for Scope 3 emissions reporting?

The best way to prepare for Scope 3 emissions reporting is to address ESG issues in the procurement process. Many companies and governments have responded to this by placing weight on sustainability initiatives in the tender and selection process. Sustainable procurement criteria that companies are using include addressing labour and human rights issues, diversity and equity, and sustainability performance. Further, as the need arises, companies should look at efficient ways to make a demonstrable commitment to sustainability that also delivers commercial value to the organisation. Leasing assets such as mobile phones, laptops and equipment or machinery can be a simple step in this direction without sacrificing cash flow.

 

Leasing assets can help procurement managers be more sustainable today


Developing a strong ESG strategy that makes a demonstrable commitment to addressing ESG issues while providing commercial value can be a delicate balance. And with “business as usual” activities already requiring significant company resources, it can be difficult to know where to start in taking steps to meet growing ESG requirements and regulations. Leasing assets is a smart place to start. It helps companies get access to the latest equipment and purchase only what’s needed when it’s needed. Further, it creates a circular and sustainable technology lifecycle when companies engage with providers who responsibly e-waste devices or refurbish them for a “second life”. And when a company chooses a full-service provider, it will have all the tools and resources that make sustainability and compliance financial reporting accurate and efficient.

 

Boost your ESG reporting capabilities with Quadrent’s Green Lease

Quadrent’s Green Lease empowers companies to reduce their environmental footprint and prepare for growing sustainability reporting requirements, such as Scope 3 emissions reporting. By using an activity such as leasing a company’s mobile phone and laptop fleet, every step of acquiring, using and disposing of devices is done with sustainability in mind. Additionally, Quadrent’s Green Lease securely decommissions devices and makes these available for a “second life”. For example, these devices can be given to those in need, such as school laptops for students who may not have had access to technology without this kind of initiative. This makes a positive social impact and demonstrable difference to a company’s environmental footprint.


This provides procurement teams with the demonstrable commitment to ESG that organisations look for in the tender process. Not only does this address immediate resource needs, but a Quadrent Green Lease establishes the long-term foundations for sustainable and ethical business practices.


Quadrent works with organisations helping them proactively address their ESG risk by accurately managing their leased technology. With a team that has in-depth leasing knowledge and specialised accounting backgrounds, we’ll help you get the most value out of your assets while addressing growing ESG requirements and reporting expectations.


Start your ESG journey simply and effectively with Quadrent. Click here for more information.